What another Conservative minority government means for IT

About halfway through the 37-day election campaign the Information Technology Association of Canada sent an open letter to each of the three top party leaders – but they didn’t get a single response.

The letter sent to Stephen Harper, Stéphane Dion and Jack Layton was displayed on ITAC’s Web site and the responses were to be posted there too. But instead Bernard Courtois found himself picking through the party’s platforms to fill in the blanks. The interest group learned a lesson in how to deal with election politics.

“We didn’t know what to expect,” Courtois says, “maybe next time we should send it out a little bit earlier.”

It’s no surprise the IT sector didn’t get much attention over the election campaign. With traditional economic sectors getting hit with a crisis mid-way through the race, the parties were in the gear that politicians usually drive in – reactive. More attention would be given to areas that voters saw as problems in need of government action.

But several IT industry experts seem cautiously optimistic about the Conservative’s approach to the sector. The question remains whether voters will elect another minority government, and if so, whether that will hamper Parliament’s ability to function properly and create the long-term plans that are needed. It’s possible that opposition parties could jockey to topple the government and form a coalition.

“A minority government makes all of these things harder,” Courtois says. “This is not good for Canada and it’s not good for a competitive economy.”

Most of those who took IT World Canada’s election poll should be happy with a Conservative win. Readers favoured the Conservatives as the party that most favoured the ICT industry, with 45 per cent selecting it over the Liberals, NDP and Green Party.

One plank of the platform likely to stay nailed in place is the Conservative’s plan to cut corporate taxes by three per cent. The Liberals haven’t expressed any opposition to the plan. The plan jibes well with ITAC’s call for a more competitive tax system to help attract outside investment.

“They’ve always been a much more free market party,” says Ian Lee, MBA director at Carleton University’s Sprott School of Business. “They tend to intervene less than the other parties and when they do, it tends to be indirect.”

In other words, the Conservatives will seek to induce economic activity with tax cuts instead of throwing money around. The tax cuts will give corporations more money on the bottom line and could see them investing more in IT as a result. That’s what ITAC is counting on, calling technology an “enabler” that helps every sector become more efficient.

The group supports the corporate tax cut, Courtois says, and rejects the NDP’s view that the rate should stay at its current 22 per cent.

“The last thing you want to do is top that and reverse it,” he says. “That’d be unbelievably counter-productive to getting jobs created and securing our future.”

Contrary to their free-market approach, the Conservatives have set aside $75 million for a venture capital fund that will help tech companies take research and bring it to the market. It’s a drop in the bucket in terms of the larger economy, but at least it’s something.

“The Conservatives are saying that if you’ve got a viable idea, we’ll give you an incentive to take it to market,” says Andy Woyzbun, lead analyst with London, Ont.-based Info-Tech Research Group.

The fund won’t benefit start-ups that are still early in the game, but companies that have been around long enough to develop some research and are looking for help going commercial. The money will help a sector that has seen capital opportunities dry up over the last several years.

“It’s been steadily declining since the dot-com meltdown,” Lee says. “In the last quarter in Ottawa, the amount plummeted yet again.”

ITAC welcomes the fund, believing it is a small part of a plan that’s needed to help companies in Canada break out of the small business category and start making more revenue. More than 95 per cent of companies in Canada fall under the small business category.

“We seem to be making it difficult for companies to grow from a start-up phase to a more established commercial phase,” Courtois says.

Conservatives addressed small businesses by tweaking the exemptions for small business income tax rate. The eligibility threshold will be raised to $500,000 and the lifetime capital gains exemption of $750,000 will be indexed to inflation, according to the Conservative platform.

That’s pretty small potatoes, according to Roberta Fox. She’s the founder of Fox Group Consulting, a small ICT analyst firm in Mount Albert, Ont. The exemption has been the same for the past decade.

“It’s taken us 10 years to get here,” she says. “It’s a good move but it would be better if it was higher.”

Conservatives should consider applying the same tax breaks they give large corporations to smaller businesses, Fox adds. That way, other local businesses benefit from having money funnel down to them.

“It has a double benefit of expending local, and then I’m putting money back into my local dealer and distributor,” she says.

The Conservative platform also mentions putting restrictions on text messaging charges and creating anti-spam legislation, as well as drafting new legislation against piracy. The party promises no more tariffs to be placed on imported machinery and equipment. It also will drop the controversial Bill C-10 because of the concerns voiced by film-makers worried about government censorship of art.

Overall, the IT sector can expect a relatively hands-off approach from the Conservatives. The industry is seen as being fairly successful without the need for intervention, Lee says, while other sectors appear just about ready to vanish without some help. But that’s not necessarily a bad thing.

“I think the presumed election of the Conservatives will be good for the IT sector,” he says. “There may not be Christmas presents for them, but the Conservatives are committed to a stable economy.”

But a direct focus on the IT sector isn’t on the radar. It’s just not an issue that’s winning over voters. Not when thousands of jobs are being lost as a result of car plants closing. Politicians are responding to the economy in crisis and their campaign literature proves it.

“I haven’t seen anything mentioned about broadband or wireless mentioned in my riding, which is unfortunate,” Fox says.

Conservative Peter Van Loan, the government house leader, was re-elected as MP for Mount Albert. None of his campaign materials focused on the IT industry, according to Fox.

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